UK TPR Contingency Plans Face Opposition

27 April 2012 (PLANSPONSOREurope.com) – The Pensions Regulator’s requirement for trustees to write a contingency plan is just another level of bureaucracy that will enable consultants to print money, Richard Butcher, Managing Director at Pitman Trustees, has told PLANSPONSOR Europe.

The requirement was outlined this morning in the Regulator’s first annual funding statement.

Butcher told PLANSPONSOR Europe: “Trustees are now required to have a written contingency plan. Having contingency planning is sensible but this is another bit of bureaucracy that you have to go through. There will be more process costs. It’s going to slow things down and it’s just another hoop to go through. It is going to discredit the system.

“I can see that there will be a lot of trustees, and by and large our trustees are lay trustees, who will be pinned down by more bureaucracy. This will be a license for consultants to print money. It is completely pointless. Poor old lay trustees will be tied up in all of this again. I would rather they spent their time and their fees that they are paying on their advisers on strengthening the funding of the scheme.” 

But Lynda Whitney, Scheme Actuary and Principal Consultant at Aon Hewitt, says such plans will allow trustees to ask more ‘what if?’ questions.
  "At first glance this may seem like another unwanted imposition on hard-pressed trustees. But we are increasingly seeing that well-developed financial management plans or flight paths are starting to address the "what if" type of questions on whether outcomes are in line with expectations. The Regulator implies this is a job for trustees alone.  However, I believe that for it to be effective it must be a well-reasoned and robust discussion between employer and trustees.”  

Raj Mody, Partner and Head of PwC's Pensions Group adds: "The Regulator has also reminded trustees that they need to ensure their recovery plans can work in practice without over-reliance on future investment outperformance where the employer covenant cannot support this. There will be a subset of schemes where this is challenging and we are working with a number of sponsors and trustees in this position to get an acceptable agreement looking at a full range of ideas and options to protect the security of scheme members' benefits. 

Punter Southall Chief Executive John Batting adds that it is imperative that trustees and employers now have access to the most up-to-date information.
  

“You wouldn’t want the captain of your ship to set sail using a navigation system based on last month’s weather conditions. Scheme funding is no different. Trustees and employers should have access to the most up-to-date information so they are better able to navigate their way and are more likely to plot a sensible course to meet their long-term objectives.  

“We believe this also questions the concept of the traditional triennial valuation. In our opinion, the natural solution is for trustees and employers to monitor actively the financial position of their pension schemes more regularly to ensure they can efficiently navigate through these turbulent economic times and effectively account for any ‘post valuation experience’. 

Graham Simons
editors@plansponsoreurope.com